After years of sharp decrease, the number of mergers and acquisitions transactions in Africa in 2013 was close to the record high reached in 2007. M&A deals have reached pre-financial crisis levels and show increased confidence in Africa, according to a new report by RisCura, a Cape Town-based investment advisor, which indicates that companies are using deals to tap into the growth of emerging markets.
Last year 991 deals were reached in Africa, up 13% from 2012 and only 29 away of the 1,019 deals signed before the global financial crisis in 2007. Africa generated around $30 billion of M&A activity last year, much lower than the 2007 high of $58 billon. In 2013, Asian investment increased, but not enough to offset dips in investment from other regions. The region attracted the interest of Asian investors coming from India, China and Hong Kong. “2012 shows a major uptick in international investor confidence in the continent,” RisCura said in its report, Bright Africa. However, “in 2013, Asian investment increased, but not enough to offset dips in investment from other regions,” the investment advisor group.
On a sector basis, the industries that attracted most interest were financials (21% of the M&A deals) and materials (20%), and they were also the highest value deals (see the graph below). The energy sector would come in third place since given the large amounts of capital required in the energy industry, it is perhaps expected that the 7% of deals that took place in this sector made up 19% of the value. On the other hand, industrials and consumer discretionary deals made up 16% and 14% of the number of deals respectively, yet each accounted for only 5% of the value.
The report also takes a stab at Africa’s change in share of global gross domestic product which has risen to 4.5% in 2013, from 4.2% in 2008, according to the report says. “Africa’s rising star is Nigeria, being the third largest gainer globally over this 13-year period, almost doubling its share of global GDP by 0.42% to 0.97%,” reads the report. In 2013, the combined GDP of African countries represented only 4.5% of global GDP. 60% of all African countries experienced an increase in share of global GDP over the period 2008 to 2013, while 65% are expected to increase their share over the 2013 to 2018 period.
Prospects on the continent for global investors are looking good. African M&A may account for around 2% of 2013 activity worldwide, but the number and quality of the transactions are only going to increase. Investment bankers are looking closely.